In a transaction valued at $12.5bn (£8.1bn), multinational consumer goods company Procter & Gamble (P&G) has agreed to sell 43 of its brands to global beauty products manufacturer Coty.
The various brands acquired by Coty include Max Factor, Hugo Boss and Lacoste, and all compete in the hair care, retail cosmetics and fine fragrance sectors.
Chief executive, president and chairman of P&G, AG Lafley, said the merger represents “a significant step forward in the work to focus our portfolio on 10 categories and 65 brands that best leverage P&G’s core competencies”.
P&G, whose extensive portfolio includes household brands such as Pantene, Head & Shoulders, Olay, Oral-B and Pampers, announced the “definitive agreement” midday yesterday and estimated a one-time gain to the business of between $5-7bn.
The merger deal, due to close in the second half of 2016, will see P&G fold its 43 separated cosmetics, fragrance and hair care brands into Coty. This “Reverse Morris Trust” transaction, which requires the simultaneous spinning off and merging of assets, is expected to give P&G shareholders a majority stake in the new entity.
Coty, which went public on the New York Stock Exchange in 2013, currently sells beauty products and perfumes under such brand names as Davidoff, Marc Jacobs and Adidas.
Coty’s shares fell six per cent in early trading after the widely expected deal, while P&G was up 0.6 per cent on the news.
Coty, which is trying to staunch a decline in sales, said it expects hair colour products to account for 24 per cent of total sales after the deal is completed.
Coty said it expects to generate about $4.5bn in annual sales from its fragrance business, making it the largest fragrance company by sales worldwide.
It also expects to become the third largest brand in the color and cosmetics sector, behind L’Oreal and Estee Lauder
Goldman Sachs advised P&G, while Morgan Stanley was the lead adviser for Coty.